Eric Schneiderman promises aggressive financial fraud probe

January 25, 2012|By Jim Puzzanghera | This post has been corrected, as indicated below

New York Atty. Gen. Eric Schneiderman, second from left in top row, during… (Susan Walsh / Associated…)

Reporting from Washington — New York Atty. Gen. Eric Schneiderman, who was tapped by President Obama to co-chair a new state and federal mortgage crisis unit, promised Wednesday to move aggressively to coordinate investigations into the causes of the subprime mortgage market meltdown.

"We’re undertaking a more coordinated effort to pull together all of the various strands of investigations relating to the conduct that created the mortgage-backed securities bubble and led to the market crash," Schneiderman told reporters in Washington after an event at the Consumer Financial Protection Bureau.

"There have been investigations going on in various states and branches of the federal government," he said. "We’re now making a concerted effort to pull everything together and move forward aggressively to address these issues."

He said the new unit, part of the existing federal Financial Fraud Enforcement Task Force, would go after "every aspect of the conduct that created the bubble and crash," including the origination of mortgages and the packaging of them into securities.

Obama announced the new effort in Tuesday's State of the Union address.

"This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans," Obama said.

Schneiderman has been one of the most aggresssive state attorneys general in investigating the actions of financial firms and others leading up to the housing bust. Along with California Atty. Gen. Kamala D. Harris, Schneiderman and several other attorneys general have balked at the ongoing talks between state officials and large mortgage servicers to settle investigations into foreclosure process abuses.

Schneiderman said Wednesday that the new unit's efforts shouldn't affect the foreclosure settlement talks because those investigations deal with conduct that took place after the housing market collapsed.

"The multi-state talks all relate to post-crash conduct. These are abuses in the foreclosure process," he said. "Our working group is focusing on the conduct related to the pooling and creation of mortgage-backed securities...the conduct that created the crash, not the abuses that happened after the fact."

[For the record, 11:55 a.m. Jan. 25: An earlier version of this post said New York Atty. Gen. Eric Schneiderman will lead a new Financial Fraud Enforcement Task Force to coordinate investigations into the mortgage crisis. Schneiderman will co-chair a new unit focused on mortgage-backed securities abuses leading up to the housing market bust. The unit will be part of the existing federal Financial Fraud Enforcement Task Force.]